Refer to Figure 23-3. Suppose that investment spending increases by 10 million, shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2. If the MPC is 0.9, then what is the change in GDP?
A) 9 million B) 10 million C) 90 million D) 100 million
Ques. 2Some researchers have been unable to find evidence of increasing returns to human capital.
Indicate whether the statement is true or false
Ques. 3Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium.
Using the static AD-AS model in the figure above, this would be depicted as a movement from
A) D to C. B) C to B. C) A to E. D) B to A. E) E to A.
Ques. 4Suppose the majority of the shares of British Airways stock were sold to a firm in the United States. Assuming all else remains constant, this will
A) create a capital inflow in the United States.
B) decrease the balance of the U.S. financial account.
C) increase net portfolio investment in the United States.
D) decrease the balance of the U.S. current account.
E) decrease foreign direct investment in the United States.
Ques. 5Refer to Table 23-11. Using the table above, calculate the unplanned change in inventories for each level of GDP, and explain what will happen to GDP.
What will be an ideal response?
Ques. 6Suppose that the bank has the following balance sheet:
Assets Liabilities
Reserves 75,000 Deposits 500,000
Loans 430,000 Net worth 5,000
If the required reserve ratio is 10 percent, what is the maximum the bank can loan out? Suppose the bank makes this loan and the borrower spends the money, which is deposited in a different bank. Show the impact of these transactions on the bank's balance sheet.
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